Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 14, Problem 5MC
To determine
Total profit.
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Suppose there are 5 types of consumers: Type A. Type B. Type C. Type D, and Type E. There are 2,000 of each type. Two software
products are sold by a monopolist: spreadsheets and word processing. Assume the marginal cost of producing each program is $25.
Consumer Type
A
B
с
D
E
Number
2,000
2,000
2,000
2,000
2,000
Spreadsheet
200
75
50
25
0
b. What is profit under this pricing policy?
Willingness to Pay
Word Processor
Instructions: Round your answers to the nearest whole number.
a. What will be the profit-maximizing bundle price?
0
25
50
75
200
Both
200
100
100
100
200
c. How will profit from this pricing policy compare to profit under independent pricing of the two goods?
When pricing independently, the profit-maximizing price for spreadsheets is $
processing is $
d. What is profit under independent pricing?
and the profit-maximizing price for word
e. Now consider the possibility of offering a bundle and selling the two programs separately. Can you find prices for the bundle and
the…
Suppose there are 5 types of consumers: Type A. Type B. Type C. Type D, and Type E. There are 3,000 of each type. Two software
products are sold by a monopolist: spreadsheets and word processing. Assume the marginal cost of production is $0.
Consumer Type
A
B
C
D
E
Number
3,000
3.000
3,000
3.000
3,000
Spreadsheet
800
300
200
100
0
b. What is profit at this pricing policy?
$
Willingness to Pay
Word Processor
Instructions: Round your answers to the nearest whole number.
a. What will be the profit-maximizing bundle price?
$
0
100
200
300
800
Both
800
400
400
400
800
c. How will profit from this pricing policy compare to profit under independent pricing of the two goods?
When pricing independently, the profit-maximizing price for spreadsheets is $
processing is $
d. What is profit under independent pricing?
$
and the profit-maximizing price for word
economics
Chapter 14 Solutions
Managerial Economics: A Problem Solving Approach
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- The graph below shows the demand and marginal cost curves for the monopolist Mr. Peanut. a. Draw the marginal revenue curve. Plot only the endpoints of the graph below. Costs and revenues 140 120 100 80 60 40 20 0 10 20 30 40 Quantity per period 50 60 D MC Tools marginal revel b. What are the values of the profit-maximizing output and price? Output: Price: $ c. What are the values of output, price and total revenue when the firm's total revenue is maximized? Output: Price: $ Total revenue: $arrow_forwardC. The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? What will its profits be? Quantity Price per Unit Total Cost 10 $10 $20 20 $8 $50 30 $6 $65 40 $4 $90 50 $2 $120arrow_forwardanswer typing i will give 5 upvotesarrow_forward
- Referring to the diagram, the monopolist will charge a price of ______ and sell quantity of _______arrow_forwardRequired information The following graph shows the average and marginal revenue curves for a monopolist: Revenues $600 500 400 300 200 100 0 10 20 MA 30 Quantity Refer to the graph above to answer this question. What is the monopolist's maximum revenue?arrow_forwardThe following graph shows a total revenue curve for a monopolist. $ 0 Quantity Refer to the above graph. The profit-maximizing firm will produce in that output level where total revenue is: A. B. C. D. TR Rising Falling Rising and falling Zeroarrow_forward
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